Reported By:
| Edited By: Ashish K Tiwari |Source: DNA |Updated: Mar 22, 2019, 06:30 AM IST
Experience centres being rolled out by Fabindia have given the brand great visibility in the market and the company now wants to take it a step further. It plans to open large format stores in heritage properties especially across South India. Ajay Kapoor, president -Retail, Fabindia, spoke with Ashish K Tiwari, about the overall business, operational challenges, retail expansion and more.
A major transition was happening with demonetization and introduction/ implementation of the goods and services tax (GST). Given the kind of materials we deal in, its sourcing happens from a lot of small players. It was something very new to the people who are working at that level. And it took us some time to get our act in place. But now we're back.
Sourcing basically happens from clusters. The products come from various clusters that specialise in different products. For instance, our furniture would be coming from Jodhpur. There are a lot of clusters in Amroha and Chanderi from where the fabrics are sourced. So GST being a mechanism, a lot of input credit thing is supposed to happen. It took some time for them to understand how it is to be done. The second thing is the GST rates that were being levied. Like in the furniture category, it was 28% initially and that slightly impacted market sentiments. But things changed when GST rates for different types of furniture was brought down.
I won't be able to comment to the extent of 100% because whosoever is falling under the slab, they are complying. People with a business of up to Rs 20 lakh are exempt. And anybody who has a turnover of over Rs 20 lakh, they are all compliant.
I'll take this question out of the ambit of GST for the moment. In Fabindia what we have done is that in the last one and a half years, there has been a conscious effort in terms of making the products more affordable, so let's forget the taxation part for a moment. When we were talking about the pre-GST era, there were different types of taxes being levied. Post GST, everything got consolidated into one. We are GST compliant today, maybe the product pricing percentage would have gone up or down marginally. However, when we talk expansion that's being planned, we believe that we will have to really make ourselves very competitive. And as a conscious effort, we have sharpened our sourcing. We have committed ourselves to volumes, at a better price and best quality. So to answer your question, there has been a significant reduction in the prices in a few categories. And overall, if I look at how the pricing has moved over the last two years, I would say that we have actually brought down prices by a couple of percentage points. It's a conscious effort, which is going on and I think that's going to be the future.
In terms of garments, there has been a significant correction. The fusion wear segment has seen a significant correction where prices for some of the products are down by 15% to 18%. And there isn't any compromise on the quality.
The numbers, this year, are going to be good particularly with October to March period driving the revenues. Till September, there were concerns but October to February has been fabulous. Things did slow around a bit initially in March but the festival of Holi changed market sentiments significantly and business is looking good. The other thing is also that the North markets have been slightly slow in March due to unexpected weather conditions.
Yes, they do. But our stores are such that every time a customer walks in they tend to pick up something or the other. And now with the opening of experience centres, we have an eatery under the banner Fabcafe, a kids zone called Tugbug with loads of hobby activities like clay modelling and block printing etc. These are paid for activities wherein we do weekend, weekly, monthly passes and it's a pretty popular concept in all the other stores where we have introduced.
We already have 10 experience centres up and running and are working on a very ambitious plan of adding 30 next year. We already have nine signed up and we're going to open three next month. We wanted to open them this month only but there have been slight project delays. These are all very big stores and there are different concepts like a cafe, a Tugbug and wellness. In Pune will be inaugurating one centre in April. We are launching another one of a similar size in Kolkata and another one in Chandigarh.
A couple of them are converts for instance in Chandigarh where we are adding more space. In Pune, we were operating out of two buildings selling garment and home category products separately. Now we are clubbing it together in a standalone building with ground plus four structure. It's going to be a fabulous place.
When you go to the South region, you get these beautiful traditional bungalows that fit into our concept of experience centres. In fact, we are in the process of signing up a store in Coimbatore. It's housed in the beautiful heritage Coimbatore Law College of a pre-independence era. We particularly look for such properties and you'd be surprised to know that the landlords of such heritage properties actually wait for us to come and sign. That's also because they know we will take good care of the property.
I cannot put a number to that but we are putting a lot of effort in that direction. Besides Coimbatore, there is one coming up in Thiruvananthapuram. We are also exploring property in Kochi right now.
Not really, we generally go by the market rate. There is some bit of negotiation as well because the investments are huge. Ultimately, we are running a business and hence have to ensure we are getting money out of it to run it viably.
So we look at the cost of the store, the cafe, Tugbug separately. A cafe of the size in our experience centre would require an investment of Rs 1.5 crore. Just the store would cost me anything between Rs 2,800 and Rs 3,000 per square feet. And the sweet spot (ideal store size) for us is between 8,000 and 10,000 square feet.
It's a very small part of our business. In fact, exports is not a focus area for us right now. We have an international presence with stores in Singapore, Dubai, a couple of stores in Fiji, one in the US, three stores in Malaysia. The Indian market is way too big so the focus is to have a very good spread here.
The average bill value is over Rs 3,000 and it's more or less consistent across the stores.
Apparel, obviously, leads the categories. However, when we are looking at business overall what we also see is that the percentage contribution of each category should not be fluctuating very significantly. So home category including furniture contributes to around 20% and that percentage hasn't dropped from the time I've started working with Fabindia four years ago. What we are working on consciously is the space optimisation. While earlier stores had a huge display of home and furniture, we are actually reducing spaces in this particular category. And at the same time, we are ensuring that the category contribution is not coming down in any way.
We have our own online channel www.fabindia.com. If everything goes well for this month we should be looking at an exit run rate of approximately Rs 36 crore. We are available on other e-marketplaces too. Our visibility is not very high on the other portals because we are not in the price game. We are present in a decent way and do business with Amazon and Flipkart-owned Myntra.
We have 293 of which 71 are franchisee stores. We have a very ambitious plan to add 100 stores altogether in the upcoming fiscal. These will be a combination of 20 standalone stores, 50 franchises and 30 experience centres. The good news is we will be opening nine standalone stores in the month of April and May and another 12 franchise stores in the same period. So there's a lot in the pipeline and a majority of them are likely to open before the festival of Diwali in the next fiscal.
